ht-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

COMMISSION FILE NUMBER: 001-14765

HERSHA HOSPITALITY TRUST

(Exact Name of Registrant as Specified in Its Charter)


Maryland						25-1811499
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

44 Hersha Drive

Harrisburg

17102

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (717) 236-4400

Former name, former address and former fiscal year, if changed since last report: Not applicable

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Shares of Beneficial Interest, par value $.01 per share	HT	New York Stock Exchange
6.875% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, par $.01 per share	HT-PC	New York Stock Exchange
6.500% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par $.01 per share	HT-PD	New York Stock Exchange
6.500% Series E Cumulative Redeemable Preferred Shares of Beneficial Interest, par $.01 per share	HT-PE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes ☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Small reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Yes ☐No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐

Yes ☒No

As of August 6, 2020, the number of Class A common shares of beneficial interest outstanding was 38,789,371 and there were no Class B common shares of beneficial interest outstanding.

Hersha Hospitality Trust

Table of Contents

PART I. FINANCIAL INFORMATION

Page

Item 1.

Financial Statements.

Consolidated Balance Sheets as of June 30, 2020 [Unaudited] and December 31, 2019.

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 [Unaudited].

Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019 [Unaudited].

Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2020 and 2019 [Unaudited].

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 [Unaudited].

Notes to the Consolidated Financial Statements [Unaudited].

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Item 4.

Controls and Procedures.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

Item 1A.

Risk Factors.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Item 3.

Defaults Upon Senior Securities.

Item 4.

Mine Safety Disclosures.

Item 5.

Item 6.

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2020 (UNAUDITED) AND DECEMBER 31, 2019

[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]


	June 30, 2020		December 31, 2019
Assets:
Investment in Hotel Properties, Net of Accumulated Depreciation	$	1,902,464	$	1,975,973
Investment in Unconsolidated Joint Ventures	7,527		8,446
Cash and Cash Equivalents	23,228		27,012
Escrow Deposits	7,374		9,973
Hotel Accounts Receivable	3,801		9,213
Due from Related Parties	2,363		6,113
Intangible Assets, Net of Accumulated Amortization of $6,705 and $6,545	1,876		2,137
Right of Use Assets	44,761		45,384
Other Assets	20,996		38,177
Hotel Assets Held for Sale	40,170		—
Total Assets	$	2,054,560	$	2,122,428

Liabilities and Equity:
Line of Credit	$	95,000	$	48,000
Term Loans, Net of Unamortized Deferred Financing Costs (Note 5)	697,597		697,183
Unsecured Notes Payable, Net of Unamortized Deferred Financing Costs (Note 5)	50,763		50,736
Mortgages Payable, Net of Unamortized Premium and Unamortized Deferred Financing Costs	331,771		332,280
Lease Liabilities	54,217		54,548
Accounts Payable, Accrued Expenses and Other Liabilities	74,161		47,626
Dividends and Distributions Payable	—		17,058


Total Liabilities	$	1,303,509	$	1,247,431

Redeemable Noncontrolling Interests - Consolidated Joint Venture (Note 1)	$	—	$	3,196

Equity:
Shareholders' Equity:
Preferred Shares: $.01 Par Value, 29,000,000 Shares Authorized, 3,000,000 Series C, 7,701,700 Series D and 4,001,514 Series E Shares Issued and Outstanding at June 30, 2020 and December 31, 2019, with Liquidation Preferences of $25.00 Per Share (Note 1)	$	147	$	147
Common Shares: Class A, $.01 Par Value, 104,000,000 Shares Authorized at June 30, 2020 and December 31, 2019; 38,789,371 and 38,652,650 Shares Issued and Outstanding at June 30, 2020 and December 31, 2019, respectively	388		387
Common Shares: Class B, $.01 Par Value, 1,000,000 Shares Authorized, None Issued and Outstanding at June 30, 2020 and December 31, 2019	—		—
Accumulated Other Comprehensive (Loss) Income	(27,097)		1,010
Additional Paid-in Capital	1,149,291		1,144,808
Distributions in Excess of Net Income	(427,393)		(338,695)
Total Shareholders' Equity	695,336		807,657

Noncontrolling Interests (Note 1)	55,715		64,144

Total Equity	751,051		871,801

Total Liabilities and Equity	$	2,054,560	$	2,122,428

The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenue:
Hotel Operating Revenues:
Room	$	15,139	$	118,980	$	86,222	$	210,465
Food & Beverage	136		18,253		10,211		32,481
Other Operating Revenues	2,137		10,280		10,917		19,210
Other Revenues	29		(12)		228		138
Total Revenues	17,441		147,501		107,578		262,294
Operating Expenses:
Hotel Operating Expenses:
Room	3,622		24,013		22,714		46,103
Food & Beverage	721		13,990		11,342		26,822
Other Operating Expenses	14,035		44,607		49,841		84,796

Hotel Ground Rent	1,058		1,114		2,121		2,224
Real Estate and Personal Property Taxes and Property Insurance	9,969		8,997		19,911		18,394
General and Administrative (including Share Based Payments of $1,799 and $3,474, and $4,255 and $5,432 for the three and six months ended June 30, 2020 and 2019, respectively)	4,187		8,100		10,021		13,700
Loss on Impairment of Assets	1,069		—		1,069		—
Depreciation and Amortization	24,322		23,964		48,510		48,092

Total Operating Expenses	58,983		124,785		165,529		240,131

Operating (Loss) Income	(41,542)		22,716		(57,951)		22,163

Interest Income	2		58		38		141
Interest Expense	(13,481)		(13,325)		(26,488)		(26,223)
Other Expense	(385)		(124)		(457)		(83)


Loss on Debt Extinguishment	—		(34)		—		(34)
(Loss) Income Before Results from Unconsolidated Joint Venture Investments and Income Taxes	(55,406)		9,291		(84,858)		(4,036)

(Loss) Income from Unconsolidated Joint Ventures	(502)		299		(1,520)		480




(Loss) Income Before Income Taxes	(55,908)		9,590		(86,378)		(3,556)

Income Tax (Expense) Benefit	(15,872)		(4,031)		(11,374)		1,233

Net (Loss) Income	(71,780)		5,559		(97,752)		(2,323)

Loss Allocated to Noncontrolling Interests - Common Units	7,164		49		10,061		1,112
Loss (Income) Allocated to Noncontrolling Interests - Consolidated Joint Venture	3,196		(8)		3,196		152
Preferred Distributions	(6,044)		(6,043)		(12,088)		(12,087)

Net Loss Applicable to Common Shareholders	$	(67,464)	$	(443)	$	(96,583)	$	(13,146)

The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARE/UNIT AND PER SHARE AMOUNTS]


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Earnings Per Share:
BASIC
Loss from Continuing Operations Applicable to Common Shareholders	$	(1.75)	$	(0.02)	$	(2.50)	$	(0.35)

DILUTED
Loss from Continuing Operations Applicable to Common Shareholders	$	(1.75)	$	(0.02)	$	(2.50)	$	(0.35)

Weighted Average Common Shares Outstanding:
Basic	38,609,922		39,127,385		38,587,011		39,121,421
Diluted*	38,609,922		39,127,385		38,587,011		39,121,421

*Income (Loss) allocated to noncontrolling interest in Hersha Hospitality Limited Partnership (the “Operating Partnership” or “HHLP”) has been excluded from the numerator and the Class A common shares issuable upon any redemption of the Operating Partnership’s common units of limited partnership interest (“Common Units”) and the Operating Partnership’s vested LTIP units (“Vested LTIP Units”) have been omitted from the denominator for the purpose of computing diluted earnings per share because the effect of including these shares and units in the numerator and denominator would have no impact. In addition, potentially dilutive common shares, if any, have been excluded from the denominator if they are anti-dilutive to income (loss) applicable to common shareholders.

The following table summarizes potentially dilutive securities that have been excluded from the denominator for the purpose of computing diluted earnings per share:


	Three Months Ended June 30,			Six Months Ended June 30,
	2020	2019	2020	2019
Common Units and Vested LTIP Units	3,943,319	3,379,354	3,891,032	3,344,178
Unvested Stock Awards and LTIP Units Outstanding	547,315	616,937	267,443	423,399
Contingently Issuable Share Awards	185,754	320,240	680,979	507,006
Total Potentially Dilutive Securities Excluded from the Denominator	4,676,388	4,316,531	4,839,454	4,274,583

The Accompanying Notes Are an Integral Part of These Consolidated Financial Statements.

Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 [UNAUDITED]

[IN THOUSANDS]


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net (Loss) Income	$	(71,780)	$	5,559	$	(97,752)	$	(2,323)
Other Comprehensive Loss
Change in Fair Value of Derivative Instruments	(2,020)		(4,122)		(33,146)		(5,902)
Less: Reclassification Adjustment for Change in Fair Value of Derivative Instruments Included in Net Income	1,228		(1,112)		2,205		(2,253)
Total Other Comprehensive Loss	$	(792)	$	(5,234)	$	(30,941)	$	(8,155)

Comprehensive (Loss) Income	(72,572)		325		(128,693)		(10,478)
Less: Comprehensive Loss Attributable to Noncontrolling Interests - Common Units	7,270		465		12,895		1,755
Less: Comprehensive Loss (Income) Attributable to Noncontrolling Interests - Consolidated Joint Venture	3,196		(8)		3,196		152
Less: Preferred Distributions	(6,044)		(6,043)		(12,088)		(12,087)

Comprehensive Loss Attributable to Common Shareholders	$	(68,150)	$	(5,261)	$	(124,690)	$	(20,658)

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARES]


	Shareholders' Equity													Noncontrolling Interests	Redeemable Noncontrolling Interests
	Common Shares	Class A Common Shares ($)	Class B Common Shares ($)	Preferred Shares	Preferred Shares ($)	Additional Paid-In Capital ($)	Accumulated Other Comprehensive Income ($)	Distributions in Excess of Net Income ($)	Total Shareholders' Equity ($)	Common Units and LTIP Units	Common Units and LTIP Units ($)	Total Equity ($)	Consolidated Joint Venture ($)
Balance at March 31, 2020	38,673,242	387	—	14,703,214	147	1,145,450	(26,411)	(362,777)	756,796	4,279,946	59,162	815,958	3,196

Issuance Costs	—	—	—	—	—	(10)	—	—	(10)	—	—	(10)	—






Share Based Compensation:
Grants	116,129	1	—	—	—	—	—	—	1	1,101,924	—	1	—
Amortization	—	—	—	—	—	655	—	—	655		3,823	4,478	—

Change in Fair Value of Derivative Instruments	—	—	—	—	—	—	(686)	—	(686)	—	(106)	(792)	—
Adjustment to Record Noncontrolling Interest at Redemption Value	—	—	—	—	—	3,196	—	—	3,196	—	—	3,196	(3,196)
Net Loss	—	—	—	—	—	—	—	(64,616)	(64,616)	—	(7,164)	(71,780)	—
Balance at June 30, 2020	38,789,371	388	—	14,703,214	147	1,149,291	(27,097)	(427,393)	695,336	5,381,870	55,715	751,051	—

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

Table of Contents

HERSHA HOSPITALITY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 [UNAUDITED]

[IN THOUSANDS, EXCEPT SHARES]


	Shareholders' Equity													Noncontrolling Interests	Redeemable Noncontrolling Interests
	Common Shares	Class A Common Shares ($)	Class B Common Shares ($)	Preferred Shares	Preferred Shares ($)	Additional Paid-In Capital ($)	Accumulated Other Comprehensive Income ($)	Distributions in Excess of Net Income ($)	Total Shareholders' Equity ($)	Common Units and LTIP Units	Common Units and LTIP Units ($)	Total Equity ($)	Consolidated Joint Venture ($)
Balance at March 31, 2019	39,213,269	392	—	14,703,214	147	1,151,654	1,534	(291,282)	862,445	4,279,946	64,808	927,253	2,848
Issuance Costs	—	—	—	—	—	(21)	—	—	(21)	—	—	(21)	—
Dividends and Distributions declared:
Common Shares ($0.28 per share)	—	—	—	—	—	—	—	(10,987)	(10,987)	—	—	(10,987)	—
Preferred Shares	—	—	—	—	—	—	—	(6,044)	(6,044)	—	—	(6,044)	—
Common Units ($0.28 per share)	—	—	—	—	—	—	—	—	—	—	(580)	(580)	—
LTIP Units ($0.28 per share)	—	—	—	—	—	—	—	—	—	—	(620)	(620)	—
Dividend Reinvestment Plan	1,231	—	—	—	—	21	—	—